NMLS Exam
1. Which federal law requires lenders to provide a Loan Estimate within 3 business
days of receiving a loan application?
A. RESPA
B. TILA
C. ECOA
D. HMDA
✅ Answer: A. RESPA
Explanation: The Real Estate Settlement Procedures Act (RESPA) requires that the
Loan Estimate be provided within 3 business days after receiving a completed loan
application.
,2. What is the primary purpose of the Truth in Lending Act (TILA)?
A. To prevent discrimination in lending
B. To ensure full disclosure of credit terms
C. To regulate the secondary mortgage market
D. To require escrow accounts for taxes and insurance
✅ Answer: B. To ensure full disclosure of credit terms
Explanation: TILA is designed to promote informed use of consumer credit by
requiring disclosures about terms and costs.
3. According to the SAFE Act, who is required to be licensed as a Mortgage Loan
Originator (MLO)?
A. Bank employees
B. Loan processors
C. Independent contractors engaging in loan origination
D. Real estate agents
✅ Answer: C. Independent contractors engaging in loan origination
Explanation: The SAFE Act requires that individuals acting as MLOs, including
independent contractors, be licensed.
4. Which of the following is NOT included in the APR calculation?
A. Interest rate
B. Discount points
C. Appraisal fee
D. Mortgage insurance
✅ Answer: C. Appraisal fee
Explanation: The appraisal fee is typically not included in the APR because it is not a
finance charge.
5. What is redlining?
A. Giving better terms to certain borrowers
B. Refusing to make loans in certain geographic areas based on demographics
C. Charging excessive fees on loans
, D. Offering loans without proper documentation
✅ Answer: B. Refusing to make loans in certain geographic areas based on
demographics
Explanation: Redlining is an illegal discriminatory practice under the Fair Housing Act.
6. Which document shows the final costs of a mortgage loan transaction?
A. Loan Estimate
B. Uniform Residential Loan Application
C. Closing Disclosure
D. Promissory Note
✅ Answer: C. Closing Disclosure
Explanation: The Closing Disclosure is provided at least 3 business days before
closing and details final loan terms and costs.
7. What is the maximum debt-to-income (DTI) ratio for a Qualified Mortgage (QM)?
A. 31%
B. 36%
C. 43%
D. 50%
✅ Answer: C. 43%
Explanation: Under the Qualified Mortgage rule, the DTI ratio must not exceed 43%
to meet safe harbor requirements.
8. Which law requires lenders to verify a borrower’s ability to repay a mortgage
loan?
A. RESPA
B. TILA
C. Dodd-Frank Act
D. ECOA
✅ Answer: C. Dodd-Frank Act
Explanation: The Dodd-Frank Act introduced the Ability to Repay (ATR) rule to ensure
borrowers can afford loans.
1. Which federal law requires lenders to provide a Loan Estimate within 3 business
days of receiving a loan application?
A. RESPA
B. TILA
C. ECOA
D. HMDA
✅ Answer: A. RESPA
Explanation: The Real Estate Settlement Procedures Act (RESPA) requires that the
Loan Estimate be provided within 3 business days after receiving a completed loan
application.
,2. What is the primary purpose of the Truth in Lending Act (TILA)?
A. To prevent discrimination in lending
B. To ensure full disclosure of credit terms
C. To regulate the secondary mortgage market
D. To require escrow accounts for taxes and insurance
✅ Answer: B. To ensure full disclosure of credit terms
Explanation: TILA is designed to promote informed use of consumer credit by
requiring disclosures about terms and costs.
3. According to the SAFE Act, who is required to be licensed as a Mortgage Loan
Originator (MLO)?
A. Bank employees
B. Loan processors
C. Independent contractors engaging in loan origination
D. Real estate agents
✅ Answer: C. Independent contractors engaging in loan origination
Explanation: The SAFE Act requires that individuals acting as MLOs, including
independent contractors, be licensed.
4. Which of the following is NOT included in the APR calculation?
A. Interest rate
B. Discount points
C. Appraisal fee
D. Mortgage insurance
✅ Answer: C. Appraisal fee
Explanation: The appraisal fee is typically not included in the APR because it is not a
finance charge.
5. What is redlining?
A. Giving better terms to certain borrowers
B. Refusing to make loans in certain geographic areas based on demographics
C. Charging excessive fees on loans
, D. Offering loans without proper documentation
✅ Answer: B. Refusing to make loans in certain geographic areas based on
demographics
Explanation: Redlining is an illegal discriminatory practice under the Fair Housing Act.
6. Which document shows the final costs of a mortgage loan transaction?
A. Loan Estimate
B. Uniform Residential Loan Application
C. Closing Disclosure
D. Promissory Note
✅ Answer: C. Closing Disclosure
Explanation: The Closing Disclosure is provided at least 3 business days before
closing and details final loan terms and costs.
7. What is the maximum debt-to-income (DTI) ratio for a Qualified Mortgage (QM)?
A. 31%
B. 36%
C. 43%
D. 50%
✅ Answer: C. 43%
Explanation: Under the Qualified Mortgage rule, the DTI ratio must not exceed 43%
to meet safe harbor requirements.
8. Which law requires lenders to verify a borrower’s ability to repay a mortgage
loan?
A. RESPA
B. TILA
C. Dodd-Frank Act
D. ECOA
✅ Answer: C. Dodd-Frank Act
Explanation: The Dodd-Frank Act introduced the Ability to Repay (ATR) rule to ensure
borrowers can afford loans.
